Why ‘Smart’ Funds Can Underperform the Market

Duke professor Campbell Harvey says more than half of all financial research is likely flawed.

By

Crystal Kim

Nov. 28, 2017 10:14 a.m. ET

By

Crystal Kim

Nov. 28, 2017 10:14 a.m. ET

What if much of the academic research driving investment strategies was faulty—if not outright wrong? It could mean that many financial products are based on false premises, says Campbell “Cam” Harvey, a finance professor at the Fuqua School of Business at Duke University, who dismisses much financial research as deeply flawed.

According to Harvey, 59, many of the more than 9,000 open-end mutual funds, 2,000-plus exchange-traded funds, and other retail investment vehicles could be based on flawed research. And it’s not just...